UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	FORM 10-Q

[X]	Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001 or

[ ]	Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________

Commission File Number 0-13299


	DEAN WITTER CORNERSTONE FUND III

	(Exact name of registrant as specified in its charter)


		New York						     13-3190919
(State or other jurisdiction of		   	  (I.R.S. Employer
incorporation or organization)			      Identification No.)


c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY    	  10048
(Address of principal executive offices)	  	     (Zip Code)


Registrant's telephone number, including area code (212) 392-5454



(Former name, former address, and former fiscal year, if changed
since last report)



Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes    X       No__________




<PAGE>
<TABLE>

DEAN WITTER CORNERSTONE FUND III

	INDEX TO QUARTERLY REPORT ON FORM 10-Q

	March 31, 2001

<CAPTION>
PART I. FINANCIAL INFORMATION
<S>				<C>
Item 1. Financial Statements

		Statements of Financial Condition at March 31, 2001
 		(Unaudited) and December 31, 2000..........................2

		Statements of Operations for the Quarters Ended
		March 31, 2001 and 2000 (Unaudited)........................3

		Statements of Changes in Partners' Capital for the
		Quarters Ended March 31, 2001 and 2000
		(Unaudited)................................................4

		Statements of Cash Flows for the Quarters Ended
		March 31, 2001 and 2000 (Unaudited) .......................5

		Notes to Financial Statements (Unaudited)...............6-11

Item 2.	Management's Discussion and Analysis of
			Financial Condition and Results of Operations...... 12-18

Item 3.	Quantitative and Qualitative Disclosures about
			Market Risk.........................................18-30

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings..................................... 31

Item 6.	Exhibits and Reports on Form 8-K....................31-33






</TABLE>








<PAGE>
<TABLE>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

	DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
	    March 31,	     December 31,
                        2001      	    2000
	  $	   $
	(Unaudited)

ASSETS
<S>	<C>	<C>
Equity in futures interests trading accounts:
	Cash                                                                                               27,442,919	 24,902,313

	Net unrealized gain on open contracts (MS & Co.)                         3,307,572                        3,944,253
	Net unrealized loss on open contracts (MSIL)                                  (138,162)                        	   (91,422)

	Total net unrealized gain on open contracts                                    3,169,410	   3,852,831

	Net option premiums                                                                            (87,009)	      (32,422)

	    Total Trading Equity                                                                    30,525,320	28,722,722

Interest receivable (Morgan Stanley DW)                                                  88,987           	105,983
Due from Morgan Stanley DW	                                             15,089                              38,685

     Total Assets                                                                                    30,629,396  	   28,867,390

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

	Redemptions payable	239,758	    286,259
	Accrued administrative expenses	124,305	106,179
	Accrued management fees 	        88,973	        83,887

	     Total Liabilities	      453,036	     476,325

Partners' Capital

	Limited Partners (8,967.897 and
	   9,204.671 Units, respectively)	29,705,652	27,959,423
	General Partner (142.103 Units)	      470,708	     431,642

	Total Partners' Capital	   30,176,360	 28,391,065

	Total Liabilities and Partners' Capital	    30,629,396	  28,867,390

NET ASSET VALUE PER UNIT	        3,312.44	      3,037.53

<FN>
	The accompanying notes are an integral part
	of these financial statements.
</TABLE>
<PAGE>
<TABLE>

DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF OPERATIONS
(Unaudited)

<CAPTION>



	     For the Quarters Ended March 31,

	      2001   	   2000
	    $	   $


REVENUES
<S>		                                                                                       <C>	                              <C>
	Trading profit (loss):
		Realized                                                                               3,578,865		743,070
 		Net change in unrealized	   (683,421)	   (744,150)

			Total Trading Results	2,895,444	(1,080)

	Interest Income (Morgan Stanley DW)	     283,462	        362,657

			Total	    3,178,906	      361,577


EXPENSES

	Brokerage commissions (Morgan Stanley DW)	351,965	478,334
 	Management fees	255,070	325,553
	Transaction fees and costs	27,508	23,694
    	Administrative expenses	      18,127	       18,539

  			Total	    652,670	     846,120


NET INCOME (LOSS) 	   2,526,236	    (484,543)


NET INCOME (LOSS) ALLOCATION

		Limited Partners	2,487,170	(478,229)
 		General Partner	39,066	(6,314)


NET INCOME (LOSS) PER UNIT

		Limited Partners	274.91	(44.43)
 		General Partner	274.91	 (44.43)

<FN>

	The accompanying notes are an integral part
	of these financial statements.
</TABLE>
<PAGE>
<TABLE>
	DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
	For the Quarters Ended March 31, 2001 and 2000
	(Unaudited)


<CAPTION>



	Units of
	Partnership	Limited	General
	   Interest   	Partners	Partner	Total

<S>                                                    <C>	                       <C>                     <C>              <C>
Partners' Capital,
  December 31, 1999                                        10,978.222	          $33,000,637  	$432,765      	$33,433,402

Net Loss 	-     	(478,229) 	(6,314)	(484,543)

Redemptions                                                       (573.488)	             (1,724,285)	      -        	   (1,724,285)

Partners' Capital,
   March 31, 2000                                             10,404.734  	$30,798,123  	$426,451	$31,224,574





Partners' Capital,
  December 31, 2000	     9,346.774	       $27,959,423	     $431,642	  $28,391,065

Net income	   -     	        2,487,170	    39,066	  2,526,236

Redemptions                      (236.774)	               (740,941)         	        -                  (740,941)

Partners' Capital,
  March 31, 2001                                                 9,110.000  	        $29,705,652  	       $470,708	$30,176,360







<FN>








The accompanying notes are an integral part
	of these financial statements.
</TABLE>

<PAGE>
<TABLE>
	DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF CASH FLOWS
(Unaudited)


<CAPTION>

	    For the Quarters Ended March 31,

	      2001     	      2000
	    $	      $

CASH FLOWS FROM OPERATING ACTIVITIES
<S>		                             <C>                                     <C>
Net income (loss) 	2,526,236	(484,543)
Noncash item included in net income (loss):
		Net change in unrealized	683,421	744,150

(Increase) decrease in operating assets:
		Net option premiums	54,587	368,712
		Interest receivable (Morgan Stanley DW)	16,996	(6,884)
		Due from Morgan Stanley DW	                                                 23,596                             -

Increase (decrease) in operating liabilities:
		Accrued administrative expenses	18,126	(32,574)
		Accrued management fees 	     5,086	       13,490

Net cash provided by operating activities	  3,328,048	     602,351


CASH FLOWS FROM FINANCING ACTIVITIES

   	Increase (decrease) in redemptions payable	(46,501)	157,836
   	Redemptions of Units	   (740,941)	  (1,724,285)

Net cash used for financing activities	  (787,442)	  (1,566,449)

Net increase (decrease) in cash	2,540,606	(964,098)

Balance at beginning of period	   24,902,313	  32,268,788

Balance at end of period	   27,442,919	   31,304,690



<FN>






	The accompanying notes are an integral part
	of these financial statements.
</TABLE>

<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Dean Witter Cornerstone Fund III (the "Partnership").  The
financial statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 2000 Annual Report
on Form 10-K.

1. Organization
Dean Witter Cornerstone Fund III is a New York limited partnership
organized to engage primarily in the speculative trading of
futures, forward and options contracts on foreign currencies and
other commodity interests. The Partnership is one of the Dean
Witter Cornerstone Funds, comprised of Dean Witter Cornerstone
Fund II, the Partnership, and Dean Witter Cornerstone Fund IV.

The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Morgan Stanley
DW Inc. ("Morgan Stanley DW").  Dean Witter Reynolds Inc. changed
its name to Morgan Stanley DW Inc., effective April 2, 2001. The
clearing commodity brokers are Morgan Stanley & Co., Inc. ("MS &
Co.") and Morgan Stanley & Co. International Limited ("MSIL").
<PAGE>
DEAN WITTER CORNERSTONE FUND III
	NOTES TO FINANCIAL STATEMENTS (CONTINUED)


Prior to May 2000, Carr Futures Inc. provided clearing and
execution services.  Demeter, Morgan Stanley DW, MS & Co. and
MSIL are wholly-owned subsidiaries of Morgan Stanley Dean Witter
& Co.  The trading managers to the Partnership are Welton
Investment Corporation ("Welton") and Sunrise Capital Management
Inc. ("Sunrise"), (collectively, the "Trading Managers").

2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW, MS &
Co. and MSIL in futures, forwards and options trading accounts to
meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on current 13-week U.S. Treasury
bill rates.  The Partnership pays brokerage commissions to Morgan
Stanley DW.

3.  Financial Instruments
The Partnership trades futures, forward and options contracts on
foreign currencies and other commodity interests. Futures and
forwards represent contracts for delayed delivery of an instrument
at a specified date and price.  Risk arises from changes in the






<PAGE>

DEAN WITTER CORNERSTONE FUND III
	NOTES TO FINANCIAL STATEMENTS (CONTINUED)

value of these contracts and the potential inability of
counterparties to perform under the terms of the contracts.  There
are numerous factors which may significantly influence the market
value of these contracts, including interest rate volatility.

The Partnership accounts for its derivative investments in
accordance with the provisions of Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133").  SFAS No.
133 defines a derivative as a financial instrument or other
contract that has all three of the following characteristics:

1)	One or more underlying notional amounts or payment
provisions;
2)	Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3)	Terms require or permit net settlement.

Generally derivatives include futures, forward, swaps or option
contracts and other financial instruments with similar
characteristics such as caps, floors and collars.



<PAGE>

DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The net unrealized gains on open contracts are reported as a
component of "Equity in futures interests trading accounts" on the
statements of financial condition and totaled $3,169,410 and
$3,852,831 at March 31, 2001 and December 31, 2000, respectively.

Of the $3,169,410 net unrealized gain on open contracts at March
31, 2001, $2,757,890 related to exchange-traded futures and
futures-styled option contracts and $411,520 related to off-
exchange-traded forward currency contracts.

Of the $3,852,831 net unrealized gain on open contracts at
December 31, 2000, $3,576,953 related to exchange-traded futures
and futures-styled option contracts and $275,878 related to off-
exchange-traded forward currency contracts.

Exchange-traded futures and futures-styled options contracts held
by the Partnership at March 31, 2001 and December 31, 2000 mature
through March 2002 and December 2001, respectively. Off-exchange-
traded forward currency contracts held by the Partnership at March
31, 2001 and December 31, 2000 mature through June 2001 and March
2001, respectively.


<PAGE>
 DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Partnership has credit risk associated with counterparty non-
performance.  The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co. and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership's assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Morgan Stanley DW, MS & Co., and MSIL
each as a futures commission merchant for all of the Partnership's
exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading
Commission ("CFTC"), to segregate from their own assets, and for
the sole benefit of their commodity customers, all funds held by
them with respect to exchange-traded futures and futures-styled
options contracts, including an amount equal to the net unrealized
gain (loss) on all open futures and futures-styled options
contracts, which funds, in the aggregate, totaled $30,200,809 and
$28,479,266 at March 31, 2001 and December 31, 2000, respectively.
With respect to the Partnership's off-exchange-traded forward
currency contracts, there are no daily settlements of variations
<PAGE>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

in value nor is there any requirement that an amount equal to the
net unrealized gain (loss) on open forward contracts be
segregated.  With respect to those off-exchange-traded forward
currency contracts, the Partnership is at risk to the ability of
MS & Co., the sole counterparty on all of such contracts, to
perform.  The Partnership has a netting agreement with MS & Co.
This agreement, which seeks to reduce both the Partnership's and
MS & Co.'s exposure on off-exchange-traded forward currency
contracts, should materially decrease the Partnership's credit
risk in the event of MS & Co.'s bankruptcy or insolvency.














<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS


Liquidity - The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker and MS & Co. and MSIL as
clearing brokers in separate futures, forwards and options trading
accounts established for each Trading Manager, which assets are
used as margin to engage in trading. The assets are held in either
non-interest-bearing bank accounts or in securities and
instruments permitted by the CFTC for investment of customer
segregated or secured funds.  The Partnership's assets held by the
commodity brokers may be used as margin solely for the
Partnership's trading.  Since the Partnership's sole purpose is to
trade in futures, forwards, and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.

The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid.  Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits".  Trades may not be executed at prices beyond the daily
limit.  If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken
nor liquidated unless traders are willing to effect trades at or
<PAGE>
within  the  limit.  Futures  prices  have  occasionally moved the
daily limit for several consecutive days with little or no
trading.  These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies.  The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses.  Either of these market conditions could
result in restrictions on redemptions.

The Partnership has never had illiquidity affect a material
portion of its assets.

Capital Resources - The Partnership does not have, or expect to
have, any capital assets.  Redemptions of additional units of
limited partnership interest ("Unit(s)") in the future will
affect the amount of funds available for investment in futures,
forwards and options in subsequent periods.  It is not possible
to estimate the amount and therefore, the impact of future
redemptions of Units.

<PAGE>
Results of Operations
General.  The Partnership's results depend on its Trading Managers
and the ability of the Trading Managers' trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards, and options markets.  The following presents a
summary of the Partnership's operations for the quarters ended
March 31, 2001 and 2000 and a general discussion of its trading
activities during each period.  It is important to note, however,
that the Trading Managers trade in various markets at different
times and that prior activity in a particular market does not mean
that such market will be actively traded by the Trading Managers
or will be profitable in the future. Consequently, the results of
operations of the Partnership are difficult to discuss other than
in the context of its Trading Managers' trading activities on
behalf of the Partnership as a whole and how the Partnership has
performed in the past.

For the Quarter Ended March 31, 2001
For the quarter ended March 31, 2001, the Partnership recorded
total trading revenues, including interest income of $3,178,906
and posted an increase in net asset value per Unit.  The most
significant gains of approximately 10.4% were recorded throughout
the quarter in the global interest rate futures markets primarily
from long positions in Japanese government bond futures as prices
moved higher amid weak Japanese stock prices and disappointing
economic data in that country.  Profits were also recorded from
<PAGE>
long positions in U.S. and European interest rate futures as
prices rose throughout a majority of the quarter amid a rattled
stock market, shaky consumer confidence, positive inflation data
and the anticipation of additional interest rate cuts by the U.S.
Federal Reserve.  In the currency markets, gains of approximately
1.6% were recorded throughout the quarter primarily from short
positions in the Japanese yen as the value of the yen weakened
relative to the U.S. dollar on concerns for the Japanese economy
and in both anticipation and reaction to the Bank of Japan's
decision to reinstate its zero interest rate policy.  Additional
gains of approximately 1.1% were recorded in the global stock
index futures markets during February and March primarily from
short positions in U.S. stock index futures as prices declined on
reports of layoffs by major technology companies, discouraging
inflationary reports and worries that the U.S. economic slowdown
will ignite a global downturn.  A portion of overall Partnership
gains for the quarter was offset by losses of approximately 3.9%
recorded primarily during January in the energy markets from long
positions in natural gas futures as prices reversed their sharp
upward trend amid bearish inventory data and forecasts for warmer
weather.  Total expenses for the three months ended March 31, 2001
were $652,670, resulting in net income of $2,526,236.  The net
asset value of a Unit increased from $3,037.53 at December 31,
2000 to $3,312.44 at March 31, 2001.


<PAGE>
For the Quarter Ended March 31, 2000
For the quarter ended March 31, 2000, the Partnership recorded
trading revenues, including interest income of $361,577 and,
after expenses, posted a decrease in net asset value per Unit.
The most significant losses of approximately 2.6% were recorded
in the global interest rate futures markets from long positions
in Japanese government bond futures as prices moved lower during
March on firmer than expected capital investment figures out of
Japan and fears that the Bank of Japan would scrap its zero-rate
policy earlier than expected.  Newly established short positions
experienced additional losses during the last week of the month
as Japanese bond prices rebounded.  Additional losses of
approximately 1.3% were experienced in the global stock index
futures markets from long S&P 500 Index futures positions as
global equity prices reversed lower earlier in January amid fears
of interest rate hikes in the U.S. and Europe and profit-taking
from the previous year.  Additional losses were recorded later in
the month from long positions in these markets as prices resumed
their decline after economic data raised fears that the Federal
Reserve would take action to slow the economy.  In the metals
markets, losses of approximately 1.2% were incurred from long
aluminum futures positions as prices reversed lower during
February on technical factors.  The Partnership also recorded
losses during March from long positions as base metals generally
lost ground amid the softening of oil prices.  In the soft

<PAGE>
commodities markets, losses of approximately 0.7% resulted during
March from long cotton futures positions as prices fell after
figures from the USDA indicated a fall in exports.  Long coffee
futures positions also incurred losses in this sector during
January as prices declined on forecasts for a bumper crop in
Brazil during 2000.  Smaller losses of approximately 0.6% were
recorded in the agricultural markets from short corn futures
positions as prices increased during January after the USDA made
a surprise cut to 1999-2000 ending stocks amid concerns for
dryness  in  Brazil and  subsequent  crop  damage.  A  portion of
overall Partnership losses was offset by gains recorded in the
currency markets of approximately 3.4% from short positions in
the European common currency as its value weakened to a lifetime
low versus the U.S. dollar during January on skepticism about
Europe's economic outlook.  The euro finished the quarter lower
relative to the U.S. dollar due to expectations that interest
rates would be held steady by the European Central Bank,
resulting in additional gains for short positions.  Additional
gains of approximately 1.4% were produced in the energy markets
from long crude oil futures positions as oil prices powered to
nine year highs earlier in the quarter on concerns about future
output levels amid dwindling stockpiles and increasing demand and
frigid weather in the Northeastern U.S. Total expenses for the
three months ended March 31, 2000 were $846,120, resulting in a
net loss of $484,543.  The net asset value of a Unit decreased

<PAGE>
from $3,045.43 at December 31, 1999 to $3,001.00 at March 31,
2000.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK

Introduction
The Partnership is a commodity pool involved in the speculative
trading of futures, forwards and options.  The market-sensitive
instruments held by the Partnership are acquired for speculative
trading purposes only and, as a result, all or substantially all
of the Partnership's assets are at risk of trading loss. Unlike an
operating company, the risk of market-sensitive instruments is
central, not incidental, to the Partnership's main business
activities.

The futures, forwards, and options traded by the Partnership
involve varying degrees of related market risk.  Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities. Fluctuations in market risk based
upon these factors result in frequent changes in the fair value
of the Partnership's open positions, and, consequently, in its
earnings and cash flow.

The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
<PAGE>
markets, and the liquidity of the markets.  At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.

The Partnership's past performance is not necessarily indicative
of its future results.  Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading.  The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.

Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partnership's
market risk exposures contain "forward-looking statements" within
the meaning of the safe harbor from civil liability provided for
such statements by the Private Securities Litigation Reform Act of
1995 (set forth in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934).  All
quantitative disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.

The Partnership accounts for open positions using mark-to-market
accounting principles.  Any loss in the market value of the
Partnership's open positions is directly reflected in the
<PAGE>
Partnership's earnings, whether realized or unrealized, and cash
flow.  Profits and losses on open positions of exchange-traded
futures, forwards and options are settled daily through variation
margin.

The Partnership's risk exposure in the market sectors traded by
the Trading Managers is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's
trading portfolio.  The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk.  Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive.  The historical observation period of the Partner-
ship's VaR is approximately four years.  The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.

<PAGE>
VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve.  Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Managers in their daily risk management
activities.

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at March 31, 2001 and 2000. At
March 31, 2001 and 2000, the Partnership's total capitalization
was approximately $30 million and $31 million, respectively.
	Primary Market         March 31, 2001	     March 31, 2000
     Risk Category	  	   Value at Risk	 	Value at Risk

Interest Rate			 (2.51)%		    		(0.68)%
	Currency				 (1.55)				(1.25)
	Commodity 			 (0.74)				(0.55)
	Equity				 (0.25)				(1.26)
Aggregate Value at Risk	 (3.49)%				(2.31)%

Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual market categories listed above.  Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.
<PAGE>
The table above represents the VaR of the Partnership's open
positions at March 31, 2001 and 2000 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures, forwards and
options, the composition of its trading portfolio can change
significantly over any given time period, or even within a single
trading day. Any changes in open positions could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
net assets for the four quarterly reporting periods from April 1,
2000 through March 31, 2001.
Primary Market Risk Category        High      Low      Average
Interest Rate	(2.55)%	(0.87)%	(1.76)%

Currency	(1.55)	(0.53)	(1.14)

Commodity	(1.65)	(0.74)	(1.22)

Equity	(0.40)	(0.01)	(0.25)

Aggregate Value at Risk	(3.49)%	(1.94)%	(2.66)%


Limitations on Value at Risk as an Assessment of Market Risk

The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements.  Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
<PAGE>
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership.  The value of the
Partnership's open positions thus creates a "risk of ruin" not
usually found in other investments.  The relative size of the
positions held may cause the Partnership to incur losses greatly
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility.  The VaR tables
above, as well as the past performance of the Partnership, give
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
?	past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
?	changes in portfolio value in response to market movements may
differ from those of the VaR model;
?	VaR results reflect past trading positions while future risk
depends on future positions;
?	VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
?	the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.
<PAGE>
The VaR tables above present the results of the Partnership's VaR
for the Partnership's market risk exposures and on an aggregate
basis at March 31, 2001 and for the end of the four quarterly
reporting periods from April 1, 2000 through March 31, 2001.
Since VaR is based on historical data, VaR should not be viewed as
predictive of the Partnership's future financial performance or
its ability to manage or monitor risk.  There can be no assurance
that the Partnership's actual losses on a particular day will not
exceed the VaR amounts indicated above or that such losses will
not occur more than 1 in 100 trading days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin.  These balances and any market
risk they may represent are immaterial.  At March 31, 2001, the
Partnership's cash balance at Morgan Stanley DW was approximately
86% of its total net asset value.  A decline in short-term
interest rates will result in a decline in the Partnership's cash
management income. This cash flow risk is not considered to be
material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-

<PAGE>
sensitive instruments, in relation to the Partnership's net
assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.

The Partnership's primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Managers
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Partnership's risk controls to differ materially
from the objectives of such strategies.  Government interventions,
defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market
participants, increased regulation and many other factors could
result in material losses as well as in material changes to the
risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

<PAGE>

The following were the primary trading risk exposures of the
Partnership at March 31, 2001, by market sector.  It may be
anticipated, however, that these market exposures will vary
materially over time.

Interest Rate.	The primary market exposure of the Partnership at
March 31, 2001 was in the global interest rate sector.  Exposure
was primarily spread across U.S., Japanese, and German interest
rate sectors.  Interest rate movements directly affect the price
of the sovereign bond futures positions held by the Partnership
and indirectly affect the value of its stock index and currency
positions.  Interest rate movements in one country as well as
relative interest rate movements between countries materially
impact the Partnership's profitability.  The Partnership's
primary interest rate exposure is generally to interest rate
fluctuations in the United States and the other G-7 countries.
The G-7 countries consist of France, U.S., Britain, Germany,
Japan, Italy, and Canada.  However, the Partnership also takes
futures positions in the government debt of smaller nations -
e.g. Australia.  Demeter anticipates that G-7 and Australian
interest rates will remain the primary interest rate exposures of
the Partnership for the foreseeable future.  The changes in
interest rates which have the most effect on the Partnership are
changes in long-term, as opposed to short-term, rates.  Most of
the speculative futures positions held by the Partnership are in
medium- to long-term instruments.  Consequently, even a material
<PAGE>
change in short-term rates would have little effect on the
Partnership, were the medium- to long-term rates to remain
steady.

Currency.  The second largest market exposure at March 31, 2000
was to the currency sector.  The Partnership's currency exposure
is to exchange rate fluctuations, primarily fluctuations which
disrupt the historical pricing relationships between different
currencies and currency pairs.  Interest rate changes as well as
political and general economic conditions influence these
fluctuations.  The Partnership trades in a large number of
currencies, including cross-rates - i.e., positions between two
currencies other than the U.S. dollar.  For the first quarter of
2001, the Partnership's major exposures were to euro currency
crosses and outright U.S. dollar positions.  Outright positions
consist of the U.S. dollar vs. other currencies.  These other
currencies include major and minor currencies.  Demeter does not
anticipate that the risk profile of the Partnership's currency
sector will change significantly in the future.  The currency
trading VaR figure includes foreign margin amounts converted into
U.S. dollars with an incremental adjustment to reflect the
exchange rate risk inherent to the dollar-based Partnership in
expressing VaR in a functional currency other than dollars.



<PAGE>
Commodity
Energy.  At March 31, 2001, the Partnership's energy
exposure was primarily to futures contracts in the crude oil
and natural gas markets.  Price movements in these markets
result from political developments in the Middle East,
weather patterns, and other economic fundamentals.  It is
possible that volatility will remain high.  Significant
profits and losses, which have been experienced in the past,
are expected to continue to be experienced in this market.
Natural gas has exhibited volatility in prices resulting
from weather patterns and supply and demand factors and may
continue in this choppy pattern.

Metals.  The Partnership's primary metals market exposure is
to fluctuations in the price of gold and silver.  Although
certain Trading Managers will from time to time trade base
metals such as copper and nickel, the principal market
exposures of the Partnership have consistently been to
precious metals, such as gold and silver.  Gold prices
continued to be volatile during the quarter.  Silver prices
remained volatile over this period as well.  The Trading
Managers have from time to time taken positions when market
opportunities developed.

Soft Commodities and Agriculturals.  At March 31, 2001, the
Partnership had exposure to the markets that comprise these
<PAGE>
sectors.  Most of the exposure, was to the corn, cotton and
soybeans markets.  Supply and demand inequalities, severe
weather disruption, and market expectations affect price
movements in these markets.

Equity.	The primary equity exposure at March 31, 2001 was to
equity price risk in the G-7 countries.  The stock index futures
traded by the Partnership are by law limited to futures on
broadly based indices.  At March 31, 2001, the Partnership's
primary exposures were to the S&P 500 (U.S.) and DAX (German)
stock index.  The Partnership is primarily exposed to the risk of
adverse price trends or static markets in the U.S. and European
indices.  Static markets would not cause major market changes but
would make it difficult for the Partnership to avoid being
"whipsawed" into numerous small losses.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at March 31, 2001:

Foreign Currency Balances.  The Partnership's primary
foreign currency balances were in Japanese yen and euros.
The Partnership controls the non-trading risk of these
balances by regularly converting these balances back into
dollars upon liquidation of the respective position.

<PAGE>
Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Managers separately attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the
Partnership's assets among different Trading Managers, each of
whose strategies focus on different market sectors and trading
approaches, and monitoring the performance of the Trading
Managers daily.  In addition, the Trading Managers establish
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.

Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash.  Cash is the only Partnership investment
directed by Demeter, rather than the Trading Managers.
















<PAGE>


<PAGE>
PART II.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS
Please refer to Legal Proceedings previously disclosed in the
Partnership's Form 10-K for the year ended December 31, 2000.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K
(A) 	 Exhibits
	 3.01	  	 Limited Partnership Agreement of the Partnership,
dated as of December 7, 	1983, as amended as of May
11, 1984 is incorporated by reference to Exhibit
3.01 of the Partnership's Annual Report on Form 10-K
for the fiscal year ended September 30, 1984 (File
No. 0-13299).

	10.01	   M	anagement Agreement among the Partnership, Demeter
and Sunrise Capital Management Inc. formerly Sunrise
Commodities Inc. dated as of November 15, 1983 is
incorporated by reference to Exhibit 10.03 of the
Partnership's Annual Report on Form 10-K for the
fiscal year ended September 30, 1984 (File No. 0-
13299).

10.01(a)	Amendment to Management Agreement between the
Partnership and Sunrise Capital, Inc., dated
November 30, 2000, is incorporated by reference to
Exhibit 10.02 of the Partnership's Form 8-K (File
No. 0-13299) filed with the Securities and Exchange
Commission on January 3, 2001.

10.02	  	Management Agreement among the Partnership, Demeter
and Welton Investment Systems Corporation dated as of
July 1, 1996 is incorporated by reference to Exhibit
10.02 of the Partnership's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (File No.
0-13299).

10.02(a)Amendment to Management Agreement between the
        Partnership and Welton Investment Corporation, dated
        November 30, 2000, is incorporated by reference to
        Exhibit 10.01 of the Partnership's Form 8-K (File No.
        0-13299) filed with the Securities and Exchange
        Commission on January 3, 2001.


<PAGE>
	10.03	Dean Witter Cornerstone Funds Exchange Agreement, dated
as of May 31, 	1984 is incorporated by reference to
Exhibit 10.06 of the Partnership's Annual Report on
Form 10-K for the fiscal year ended September 30, 1984
(File No. 0-13299).

	10.05		Amended and Restated Customer Agreement, dated as of
December 1, 1997, between the Partnership and Dean
Witter Reynolds Inc. is incorporated by reference to
Exhibit 10.05 of the Partnership's Annual Report on
From 10-K for the fiscal year ended December 31, 1998
(File No. 0-13299).

10.06	Customer Agreement, dated as of December 1, 1997, among
the 	Partnership, Carr Futures, Inc. and Dean Witter
Reynolds Inc. is incorporated by reference to Exhibit
10.06 of the Partnership's Annual Report on Form 	10-K
for the fiscal year ended December 31, 1998 (File No.
0-13299).

10.07	International Foreign Exchange Master 	Agreement, dated
as of August 1, 1997, between the Partnership and Carr
Futures, Inc. is incorporated by reference to Exhibit
10.07 of the Partnership's Annual Report on Form 	10-K
for the fiscal year ended December 31, 1998 (File No.
0-13299).

10.08	Customer Agreement, dated as of May 1, 2000 between
Morgan Stanley & Co. Incorporated, the Partnership and
Dean Witter Reynolds Inc. is incorporated by reference
to Exhibit 10.07 of the Partnership's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000, (File
No. 0-13299).

10.09	Amendment to Management Agreement between the
Partnership and Welton Investment Corporation, dated
November 30, 2000 is incorporated by reference to the
Partnership's report on Form 8-K (File No. 0-13299),
filed with the SEC on January 3, 2001.

10.10	Amendment to Management Agreement between the
Partnership and Sunrise Capital Management, Inc.,
dated November 30, 2000 is incorporated by reference
to the Partnership's report on Form   8-K (File No. 0-
13299), filed with the SEC on January 3, 2001.







<PAGE>
(B)		Reports on Form 8-K


Filed with the Securities and Exchange Commission on January
3, 2001.  Effective December 1, 2000, the Partnership amended
its management agreements with each of Welton Investment
Corporation and Sunrise Capital Management, Inc. under which
the monthly management fees paid by the Partnership to each
trading manager was reduced from a 4% to a 3.5% annual rate.






















<PAGE>





	SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.




                    	Dean Witter Cornerstone Fund III
                             	(Registrant)

                           	By:	Demeter Management Corporation
		(General Partner)

May 15, 2001                  By:/s/Raymond E. Koch    	_____
                                    Raymond E. Koch
                                     Chief Financial Officer





The General Partner which signed the above is the only party
authorized to act for the Registrant.  The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.